Blue Ocean Strategy: Analytical Tools & Frameworks

September 16, 2010Presented by: Lana Grimes,

Andrei Gololobov, & Laura McMannis

Analytical Tools & FrameworksEssential for development of blue ocean

strategySystematic & actionable as competing in red

watersEnsure risk minimization

How do you break out of red ocean to make competition irrelevant?

How do you open up and capture a blue ocean of uncontested market space?

The Strategy CanvasCentral to value innovation & creation of blue

oceansDiagnostic & action framework

Purpose of Strategy CanvasCaptures the current state of play in the

known market spaceCompetition investingCompetition factorsReceived by customers

Reorients strategic focusCompetitors AlternativesCustomers Noncustomers

THE FOUR ACTIONS FRAMEWORK

THE FOUR ACTIONS FRAMEWORK“QUESTION BY QUESTION”Which factors that the industry takes for

granted should be eliminated?Factors which your industry has long competed

onFactors of competition intended for a Red

Ocean Strategy.Factors which we take for granted but no

longer have any value

Which factors should be reduced well below the industry standard?Factors which are pushing to hard to stay

competitive but yield little or no gain over the competition

High development costs but little or no profit

• Which factors should be raised well above the industry standard?– Eliminate compromises your industry forces

consumers to make

Which factors should be created that the industry has never offeredFind a new source of value for the customerShift demand and/or create new demandShift strategic pricing in the industry

APPLICATION TO A REAL-WORLD EXAMPLE: CASELLA WINESWine market stagnant in the USFew people knew how to understand and

appreciate the complexity of winesCompeting wine yards all marketed on

fineness, quality, and prestigeNarrow target market: difficult to understand

for the average consumer

Expansive range of wines made it difficult for consumers to choose

Stereotyped by the general public as a formal upper-class drink

The average consumer was used to something more “drinkable” like beer or cocktails

THE FOUR ACTIONS FRAMEWORKAPPLIED TO CASELLA WINES

Which factors that the industry takes for granted should be eliminated?Promotional campaignAging qualitiesEcological terminology and distinctions (What

does tannins, oak, and complexity mean to the average consumer?)

Which factors should be reduced well below the industry standard?Wine complexityWine range (no complicated array of choices)Vineyard prestige (Red Ocean marketing)

o Which factors should be raised well above the industry standard?o Price kept above the price of budget wineso Budget wine drinkers moved up

Which factors should be created that the industry has never offered?

Create a wine that is fun and easy to drinkOnly two variants create make selection easyLabeling sets wine as a fun and informal drink,

appealing to more potential consumers

ELIMINATE-REDUCE-RAISE-CREATE GRID

ELIMINATE-REDUCE-RAISE-CREATE GRIDPushes companies to differentiate and reduce

costs, breaking the value-cost trade off.Checks companies which decide to focus on

only creating new products without reducing costs

Easy to understandEvery factor is scrutinized leading the

company to discover implied assumptions made unconsciously in competition

ELIMINATE-REDUCE-RAISE-CREATE GRID: APPLIED TO CASELLA WINES

Three characteristics of Good Strategy

FocusDivergenceTagline

Why are these characteristics important?What will the companies achieve by adhering

to these principles?

Southwest:Focus on friendly service, speed, and

frequent point-to-point flightsDivergence: Uniqueness of the value curveCompelling tagline: “The speed of a plane at

the price of a car – whenever you need it.”

Johnson & JohnsonCompetes in various categories of healthcare

industryTries to achieve divergence through constant

pursuit of innovation and the leading edge medical knowledge

Compelling tagline: “The Family Company”

Marketing strategies and consumer demographics

General consumer

Medical professionals

Innovation Staying ahead of the game: Inimitability and

sustainable advantageTechnology S-CurveEthics codes

Takeaways Strategy Canvas has two purposes:

Captures the current state of play in the known market space: where competition is currently investing and the factors that the industry competes on.

Calls for action by reorienting your focus from competitors to alternatives and from customers to noncustomers of the industry.

Marketing: By reinventing wine, Casella Wines created a whole new target market

in addition to widening the existing market for wines. The Four Actions Framework and the Eliminate-Reduce-Raise-Create

Grid are almost a straight-forward step-by-step strategy which offers an answer to all four parts of the Marketing Mix.

Importance of staying focused: Remember what the product that company delivers is all about. What is

the utility to the customer? Do not lose sight of self by trying to differentiate from competitors. Strive to achieve uniqueness.